Canada likely to approve big oil merger - analysts

25 March 2009 17:31[Source: ICIS news]

TORONTO (ICIS news)--Canada is likely to approve the proposed $15bn (€11bn) merger between Canadian oil majors Suncor and Petro-Canada, which would create a "national energy champion," analysts said on Wednesday.

The deal comes after a string of takeovers of Canadian resources firms by foreigners. Only last month, Abu Dhabi's IPIC bid $2.3bn for Canadian petrochemicals major NOVA Chemicals.

The focus of the Suncor/Petro-Canada merger is on the oil sands in ?xml:namespace>Canada’s Alberta province, which potentially holds the world's second largest oil reserve after Saudi Arabia, the analysts said.

However, Communications, Energy and Paperworkers (CEP) union, which represents oil and chemical workers, urged a thorough review, given that the deal affected Canada’s national energy security and involved job losses.

One complication is an ownership restriction on Petro-Canada, which was founded as Canada’s national oil company amid the 1970s oil crises but was later privatised.

The merger also involves considerable petrochemical and refining assests but analysts did not see any immediate impact on production levels.

“I would assume that Petro-Canada will continue its propylene and BTX [benzene, toluene, xylene] businesses as before and that Suncor will continue to run its ethanol business as before, so not much impact,” John Cummings, an independent Toronto-based petrochemicals analyst, said in a preliminary assessment.

The combined company would have three refineries in Canada and one in the US.

Chemical production capacities includes Petro-Canada’s 350,000 tonne/year of benzene, 240,000 tonnes/year of toluene, 210,000 tonnes/year of xylene, 45,000 tonnes/year of propylene and 25,000 tonnes/year of orthoxylenes in Montreal, according to the Canadian Chemical Producers Association.

Petro-Canada also has 350,000 tonnes/year of paraxylene capacity at its 51%-owned ParaChem affiliate in Montreal, and it has a specialty lubricants plant in Mississauga, Ontario.

Suncor, for its part, is a supplier to a propylene project near Edmonton, Alberta. That project uses olefins-rich off-gases from a Suncor oil sands upgrader as chemical feedstock.

Suncor also has a 200m litre/year ethanol facility in Sarnia, Ontario. Plans to expand ethanol production at Sarnia to 400m litres/year have reportedly been shelved.